South-East Asia (later SEA) offers great opportunities for businesses combining large geographical area with sizable population and continuous growth. The region still has many challenges and is highly diverse. This is important to understand when navigating the businesses here. The region has been receiving increasing global focus both economically but also politically and Singapore is in the middle of it all.
Disclaimer: I have been here in the region now a full year in total and this blog consists of my personal views and not necessarily those of the Nordea Bank. Most of the content I have collected here and there and cannot always credit the source to the person or organization that deserves it, let it be bank secrecy or bad memory. The one thing I can say is that Business Sweden has published a great study about the region that I would highly recommend to anybody interested to understand the current status of the business environment here! Link in references.
South East Asia – almost one tenth of global population and annual GDP growth of 5 %
SEA is the world’s fastest growing area. It also has total population of roughly 650 million people. Indonesia alone has more than 260 million people, Philippines over 105 million and Vietnam about 95 million. It is also a very diverse region, as countries differ both in political and economic terms. In addition, you have great variety of different cultures and religions. On top of this the living standards and educational levels differ from one nation to another. So, in order to capture the business opportunities here in the region, one must be able to navigate through it all.
Although the countries differ the below themes are common to SEA:
- The level of infrastructure in many countries is inadequate, and a lot of investments are needed.
- The population is mainly young and increasingly digital, and the urbanization is continuing at speed.
These mean that smart city initiatives are top of the agenda, as well as focus on investments into ports and railroads, transportation and energy. Developments into manufacturing are also needed as costs are increasing and the productivity should be higher. For the region to support historical growth levels increases in
Finally, maybe the biggest developments and hence opportunities are to be found on the consumer side. There the adaptation of latest technologies and the increasing focus on quality and sustainability by the growing middle class are creating a new profile of consumer in Asia.
All in all, although the ASEAN as a region is diverse and not as nearly integrated as EU, they still want to continue the collaboration in the future, especially on the economic side. The ASEAN initiative is a good example hereof.
Photo: Singapore skyline/gettyimages
Singapore is the gateway to the whole region
Singapore is much more than only Singapore. It is the gateway to the SEA as well as other ASEAN and APAC countries. As an economically and politically stable city state with common law and geographically at the center of the region, Singapore is basically the unofficial capital of SEA. It has been increasing its status over other cities like Kuala Lumpur, Bangkok and Hong Kong.
Singapore is ranked high in easiness of doing business and you have governmental support and focus in many key industries that are important for the future. So, no wonder that many APAC headquarters of multinational corporations are located here in Singapore. Also due to the governmental support there is buzzing start-up ecosystem growing rapidly and many corporations have been establishing their innovation labs here in Singapore.
Also, many Nordic companies have centralized their SEA decision making as well as financial operations here in Singapore. For new Nordic companies looking towards the region, it should be noted that coming to Singapore might involve some paper work at the start, but the easiness is there, and you can reach the whole region from here.
On a side note: If you want to read a good book, I would recommend The Future is Asian by Parag Khanna [2019] to get up to speed about the diversity and history of the region as well as how this part of the world is today and what the future might look like.
Opportunities for Nordic companies in SEA
Nordic companies usually have a very good product offering on their field. Highly specialized solutions that outrank the competitors might still not sell, when only the price tags are compared. In the region there is still the challenge that customers are looking too heavily on the purchase price and not considering the total lifecycle costs or operational performance as much. This is hopefully slowly changing together with increasing focus on the sustainability aspects as well as the effects to the living standards.
This is an advantage for Nordic brands, which should be highlighted and used more aggressively when negotiating contracts in SEA. The understanding among the companies here seems to be that although centralized operations might be in Singapore, local sales efforts are very important. So, the Nordic values should also be recognized and made more visible by the local sales offices, when they promote products and services here in the region. Also, as the interest into the region is coming more and more from companies from countries like China, Korea and Japan, the more the sales support should also be done on the group level. The larger the project the more important it is to have good contact with the company in their HQ’s home country and not only in the country where the project is done. This is especially so with the Belt and Road Initiative.
Nordea is in Singapore to help companies safely and successfully navigate ‘SEA’. We are an active member of the Nordic ecosystem and bring the regional knowledge for our customers at group level in the Nordics or locally in connection with banking needs and services during Asian business hours.
Great example of our collaboration with stakeholders was a SEA event organized in Nordea HQ in Vallila, Helsinki, few weeks ago together with Business Finland and Finnvera in order to increase the awareness of the region. Many thanks to Lisa Tolvanen (Senior Adviser, Finnvera) as well as Riku Mäkelä (Business Finland Singapore, left) and Juha Miikkulainen (Business Finland, Head of India APAC region, middle).
What next for SEA
Of course, the developments in the global economy and politics will have an effect on the region. Nobody can disregard the US-China trade or tech wars which seem now to be new normal for future decades. The changes to the supply chains are also bringing opportunities for the SEA countries. Businesses were moving manufacturing out of China due to increased costs already before the US tariffs, now it seems that the uncertainty will also direct most of the future FDI outside of China, and here in the region it means SEA.
Forecast for the region is that towards 2025 Asian countries will climb up in value chains, the already increasing intraregional trade will intensify, innovations will be more sophisticated, and the competitive landscape will be more challenging.
Nordic companies should be clear about how to be involved in the region. This is because the pace and leapfrogs we are witnessing in SEA are already challenging the old business models and the home turf. More companies and solutions from Asia are already setting sail towards the Nordics and Europe!
On a personal note, it has now been a full year, and like said in my last blog, time really flies. It has been an amazing experience so far and I am looking forward to what the 2nd year will bring. I am thankful for all the support I have gotten from the family, friends, colleagues and customers here and back home.
References:
Jani Valtonen is a member of the FBC Board and expert in international trade and financial markets. He is working in Nordea Markets Singapore and serving both institutional and corporate clients in the region. He is active in the Nordic ecosystem in the region and has a mission to help Nordic businesses to enter and grow both in Singapore and in the whole SEA.
